Progress has been made, report says, but election and financial issues need attention.

A long-awaited watchdog report released Tuesday said the embattled city of Vernon has made several important reforms but found that the City Council needs to consider more actions, such as further slashing council members' salaries, scaling back the use of expensive outside attorneys and possibly selling off controversial housing stock.

"More needs to be done," said former state Atty. Gen. John Van de Kamp, whom the city hired to examine its policies and procedures. "But unquestionably the city has opened up to the world and the need to operate on a 'best practices' approach."

Van de Kamp's review was launched in February as part of Vernon's effort to defeat AB 46, a bill in the state Legislature calling for the city to be disbanded. Supporters of it argue that Vernon, an industrial city with only 112 residents, is without an independent electorate and has been controlled for decades by a small group of individuals. Three top city officials have been convicted on public corruption charges in the last five years.

Almost all of the residential units in Vernon are owned by the city, which has rented them, mostly to people with connections to the city government, at drastically subsidized rates. Critics have questioned how independent the electorate actually is given that the City Council is their landlord.

Van de Kamp said he and his team were surprised to find how many of Vernon's residents had "direct connections" with officials at City Hall — 25 of the city's 62 registered voters.

"It's just a closed community," Van de Kamp said.

On Tuesday, the City Council appointed members to a new housing commission, which will formulate a housing policy and manage the leasing of city-owned homes. Van de Kamp said that if the new housing authority adopted a rental program for the city-owned housing, it should set the rents at market rates "and establish policies that avoid favoritism to city personnel and their relatives and friends."

"Their other option is to sell, but if they put the homes up for auction or whatever, what do you do with the existing guys who are elected and who live there?" Van de Kamp said.

Members of the housing committee, which will formulate a new housing policy and manage leasing, are Mayor Hilario Gonzales; residents Reno Bellamy and Gabriel Early; business representatives Eric Gustafson, Bill Hughes and Henry Haskell; and Hector Garcia, an employee at the Vernon-based Farmer John. The committee is to meet next Thursday.

Van de Kamp also found that the city agreed to overly generous contracts with attorneys and consultants. He singled out a contract given to a company for business and financial services last year under which the firm was allowed to increase the rates at its own discretion, without prior approval from the council.

In an interview with The Times, Van de Kamp said he didn't know why the city would enter into such an agreement.

"I don't want to speculate as to whether this was done intentionally or not, but clearly, those should not be permitted," he said.

Van de Kamp said his review also found that city officials did not appear, as other cities do, to be soliciting reduced government rates before hiring outside legal firms. Earlier this year, The Times reported that Vernon has spent more than $54 million on lawyers over the last five years, paying some hourly rates of more than $900 an hour.

Van de Kamp cited Vernon's contract with Latham & Watkins LLP, which has emerged in the last several years as the city's go-to firm on legally sensitive issues, including the disincorporation bill. He said that the city hired the firm when Vernon was "under some duress and big changes had to be made," which may have initially played a role in not negotiating for lower hourly rates.

He acknowledged that many people thought the $550 an hour he was charging Vernon was high, but Van de Kamp said it was "several hundred dollars" less than he could charge for his firm. He said that should be true with Latham & Watkins and other law firms too, and that Vernon should negotiate for better rates.

"I have a feeling that in the past, a lot of money was going out with law firms," Van de Kamp said.

In the report, Van de Kamp also mentioned several practices the city has engaged in that he said seemed designed to maintain political control. He noted that Vernon's five council members serve five-year terms, and that only one of them must run for election each year.

"This is a highly unusual election system and appears to be an effort to thwart new or dissident groups from seeking and taking over the elective positions in the city," he wrote, urging the city to hold elections every two years, with two council members running for four-year terms each time.